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Monetary policies to be more predictable and consistent under new BOK governor

Lee Seong-tae, who recently became the governor of the Bank of Korea, said the economy has been showing signs of recovery from the second half of last year in tandem with the growth in domestic consumption. In his inaugural speech before the central bank's staff on April 3, he said he will lead the central bank to keep guarding these growth signs and consolidate the sustainable stable growth base, although it is not an easy job with loads of difficulties on the way.
The central bank chieftain pointed out that sluggish facility investment, aging, and low birth rates are likely to hurt the economy's potential for growth in the near future. The opening of the country has created the gap between the industries with the lessening of the ability to create jobs. Korea's manufacturing sector, which has been enjoying comparative advantage, is being pursued by developing countries which are stepping up their strategies to catch up with advanced countries while the competitiveness of the new technology and service sectors, remain still below those of advanced countries, he said.
The new central bank governor said management of the economy and business could no longer resort to regulations and protective measures in this age of liberalization and globalization. With the Korean economy reaching advanced stages, it has been experiencing the need to cope with changes brought on by liberalization, knowledge and information and the emergence of low-wage economic sphere.
Under these circumstances, the future of the Korean economy depends on how fast it could secure competitiveness and effectiveness on the global level. The most urgent task in this connection is to strengthen the market function in the economic management system to induce a creative and innovative effort from the private sector. He said the weak sectors would have to be supported with the ability to grow through self-help effort or measures to help them grow effectively.
In order that these measures might have expected results, they have to be carried on with a long-term outlook backed up by a stable economy. In this regard, the role of the central bank becomes ever more important. In monetary policies, the central bank should have continuity and predictable at the market. The central bank should have the ability to look far ahead of the economic fluctuation to be able to the continuity in its monetary policies and accordingly, the bank has to strengthen its research function to focus the core capacity on the analysis of economic trends and prospects, he claimed.
Also important is the timing of its policies. It has become very difficult to make economic projections far ahead due to changes in economic structure and major economic players with the variable economic factors becoming more blurry. Due to these uncertainties, the central bank should be more cautious in making its policies and it cannot afford to miss the timing of the policies. The bank should be more daring in making up its policies despite the danger of uncertainties and always be ready to expand the exchange of information with the financial market. This is very crucial as the market is the first to be affected by the bank's monetary policies, making it a key partner for the central bank.
In this connection, the bank should be able to send signals to the market of its policies to be made and get its feedback to raise the effects of its policies and their transparency, the new governor said.
He said the base for the existence of the central bank is the trust from the people, which can be earned only when it does its job fully with good results.
Viewed from such an angle, the management organization should focus on doing its job to full capacity to strengthen it as a policy-making organization. The governor said the bank requires highly-skilled professionals on every sector of its business and therefore, should train professional manpower and its personnel management should be based on merits based on the capacity of individual employee. The bank's organization should be rechecked in terms of producing a high synergy effect. He said he will soon begin the work to draw up a mid-to-long term strategy for the bank that is able to cope with changes in the bank's role far ahead. He would like to call on every officer and staff to spare no effort to improve themselves because the central bank's employees could easily become complacent due to the absence of competitors. But they should remember that other policy-making organizations in the country and foreign central banks are their rivals. Therefore, we should double our efforts to be top professionals in our responsible areas. nw

Bank of Korea Gov. Lee Seong-tae